The future of retail: the great polarization

Just like the music business, the movie industry, the media, hotels, taxis and [ insert your industry here ], the retail market has entered a time of difficulty and uncertainty. And the Swiss retailers are no exceptions.

Since the advent of the Internet, as soon as an industry awakens to a new disturbing reality, it ends up blaming it on anything digital. Indeed, after an initial phase of denial, these disrupted actors quickly request protectionist measures to protect and legislate their market.

In business as much as in politics, the authoritarianism required to return to the good old days is often the most comfortable solution.

Thanks to the current faith in technological determinism and our naive hopes in solutionism blaming uberisation and unfair competition does make sense. But at enigma, we believe in an other story. We believe that such worldview reveals a wide socio-economic dead angle.

Our field research, our data analysis tell different stories. We see a society in a deep change. Far from the social and economical architecture of the 20th century.

Dash Button — Amazon

New habits are spreading

Amazon Dash buttons for automatic resupply are a perfect example. A certain type of products like cleaning articles make sense to be automated. We have seen new startups proposing home deliveries of groceries based on the season and customers wearable health and sport data. We call this mass customized automation.

In some retail market, purchases are more and more linked to travel. With this bleisure trend (business + leisure), people enjoy prolonged business trips to discover cities and shop in new places. How many times did you extend a business trip in order to do some shopping and enjoy a few good restaurants?

Behind this trend lies a new reality: today, shops have a competition very far from their geographic location.

Have you noticed how often commuters shop in train stations? This reveals another trend. This trend is about the alignment of groceries with mobility and how more and more mobility nodes become shopping nodes.

With congested roads and cities, mobile technology has allowed us to make a better use of commute times. Hence making public transport more functional for a lot of people. This reality is reshaping our desire for rapid interoperable transportation services where shopping fits as a quick win.

In Switzerland, this trend is also amplified by a painfully conservative approach to opening hours for shops.

Retail is evolving and it's really interesting to have a look at it.
Have you realized that sometimes, now, you do your groceries in petrol station. When you think about shift you have to think about the one that already a cure, like music, taxis, hotel, cinema. All of them went through the same three phases:
1rst : deny “Oh no, that’s just a side effect. It's not really important for us”. Do you remember when we Taylor told us : “Oh yeah, you know... sales online and not something very important”.
2nd : fight back with the old weapon. So usually that phase arrived, when numbers of the digital industry grow and then people are like :”Okay let's do more of the same”. Usually it's a complete failure.
3rd is legal and when nothing works.. you call your lawyer and that's completely normal!

And what happens is, now we are in phase number three. So you will see more and more retailers trying to use legal to defend themselves against a ship, that is unstoppable. But there is another way to look at it. When the map is redrawn like it is today, the entrepreneur inside me smile and see that immediately : you can throw a new route, you can find new ways, you can challenge the big guns with small small budget. And retail business is living that right now, because people are seeing the world from a different angle. They don't want to go to grocery stores anymore, waiting queue, waiting lines and have everything at the same place.
Can you imagine that in 2014, is the first year ever that in the US there is less meter square of malls, than the year before. And you know that in the next few years in China there is a projection that say that 30% of shopping malls will close. This is gonna be a new map and they are new routes, they are fantastic opportunity. We have many examples of small businesses, that use this at the advantage.

At the core of these changes, are three forces. How we live, where we live, housing. Where we work, how we work, and how we get there mobility. And if you look at this, the interactions between these three forces, these three key aspect we call it “the Golden Triangle of change”, you rapidly see for example how more and more we are lining our shopping. The painful shopping, the everyday shopping for food and little things, we have to do with our mobility. More and more we shop where we have to go throughout a day.
We work more and more at home, we work differently, we work collaboratively and all these changes are having an impact in how people shop. And of course we cannot talk about retail without talking about online shopping and we see that our huge beliefs about online shopping stealing sales from physical retail spaces.
And we see other things, we see people making up their mind comparing products online, having shopping evenings with friends, girls having e-shopping evenings, where they eat -they watch movies -they listen to music. They make up their mind and then they walk in the store to try things on, to have a conversations with your service your staff and then purchase in the store. So it's really about finding out, what is painful, what is not comfortable for your consumers and what can be automated. And where is the human experience, a human service extremely valuable, which can add value. So we see that shopping experiences are being polarized and if you're staying in that dead-ugly-gray middle, you are going to suffer.
So what can you automate and what is important for you to keep as a human service and that's very important!
So we come up with four questions :
What is this meaning for your brand ? Your google brand that you shape in the 90s, ten years ago, five years ago.
What does it mean for your brand?
What does it mean for your shopping experience, the whole journey from online to the store, from the store to online and back into another store.
What does it means in terms of services?
And what does it mean in terms of vision? Because you're not just going to adapt to today, you have to prepare for 2030 and what's coming next.

Those big shifts are lands of opportunity. Let's make this opportunity, your opportunity!

Understanding the new relationship between retail and shopping

At the heart of these shifts, we see a golden triangle. It shows the increasingly complex interactions between how we live, how we work and how we move. Home, work, mobility.

These pillars are in a current massive shift where their historical boundaries born in the 19th century are not just challenged but rather smashed one into another. And retailers are at the heart of this multidimensional torque.

Sometimes you want to go shopping. And sometimes you just have to. Accepting this tension is the first key to understanding the changes at play in retail today. As our credo mentions it, we believe that what can be automated will be automated. That’s exactly where lots of startups and giants like Amazon are headed.

The questions are then, where is human contact the most valuable and essential? What shopping stories can be amplified by data? What part of the retail experience needs the empathy and care of a human relationship?

Answering these questions requires to understand the sociographic trends and new narratives behind how society is changing today. What makes sense for a certain group of customer might be very different for another.

Based on their contexts and relationships with brands and products, understanding these different stories can help build new customer experiences.

As we are shifting from a world built around cars towards a world built around our mobile phones, the transformations of how we move, work and shop is fundamental.

Photo by Yanko Peyankov — Unsplash

Designing a human shopping experience

We deeply believe there will be a future for retailers. Automation and delivery won’t be enough. Some purchases are planned. Some others are chores. But our pleasure in wandering in the streets and stumble upon the unexpected will never go away.

Retailers can have a future but they need to change something in their approach. First of all is accepting there are have-to moments where people just want to get what they need, as quickly as possible.

Since it has to be as convenient as possible, automation, delivery or commute shopping will probably win over traditional retail. Unless smarter retailers find a great way to transform have-to moments into want-to moments, that is.

So the other goal is to focus on want-to moments and make them more human. Turn these moments into human, emotional experiences. Design them in such a great way that nobody would choose an automated or non-human solution over a retail offer.

Use the power of human interaction wherever it makes sense.

Photo by Alexandru Tugui — Unsplash

Ultimately, retailers who are to survive are the ones who will succeed at focusing on their client’s needs and emotional expectations. Simply displaying products you assume your clients might want won’t be enough.

Easier said than done, you must be thinking right now. Yep, you’re right. But where would all the fun be if it wasn’t hard? How would you outsmart your competitors? Are you struggling to make human and automation work together? Are you having a hard time finding your perfect value proposition? Are you trying to read your consumers’ minds? Ask us, we’re here to help.

Cover image credit — SBB CFF FFS

Tanks to Romain Pittet for his ability to make sense and capture what’s in my head in short deadlines.

May 31, 2017 - Where we stand

Pascal Wicht

Pascal Wicht began his career twenty years ago in Johannesburg. His practice of future studies and trend analysis drives his vision and his creative direction for the agency. By bringing his experience of future thinking within Enigma, Pascal helps the different business units make sense of our current fast changing, complex and uncertain times.